LYCEUM OF THE PHILIPPINES, INC., vs.

COURT OF APPEALS, 219 SCRA 610 (1993)

LYCEUM OF THE PHILIPPINES, INC., petitioner, vs.

COURT OF APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN, INC.,
LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI LYCEUM, CENTRAL LYCEUM OF
CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC. and
WESTERN PANGASINAN LYCEUM, INC., respondents.
G.R. No. 101897. March 5, 1993. FELICIANO, J

FACTS:
 LPI is an educational institution duly registered with SEC. When it first registered with the SEC, it used the corporate
name Lyceum of the Philippines, Inc. and has used that name ever since.

 LPI commenced in the SEC a proceeding against Lyceum of Baguio, Inc. to require it to change its corporate name and
to adopt another name “not similar to or identical with” that of LPI. Associate Commissioner Julio Sulit held that the
corporate name of LPI and LBI were substantially identical because of the presence of a "dominant" word "Lyceum"
the name of the geographical location of the campus being the only word which distinguished one from the other. The
SEC also noted that LPI had registered as a corporation ahead of LBI and ordered the latter to change its name to another
name "not similar or identical with" the names of previously registered entities.

 LBI assailed the SEC’s order before the SC, which denied the same. Armed with said SC resolution, LPI wrote to all the
educational institutions it could find using the word "Lyceum" as part of their corporate name, advising them to
discontinue such use of "Lyceum".

 LPI claimed proprietary right over the word “Lyceum” and instituted proceedings before the SEC to compel Lyceum of
Aparri, Lyceum of Cabagan, Lyceum of Camalanuigan, Inc., Lyceum of Lallo,Inc., Lyceum of Tuao, Inc., Buhi
Lyceum, Central Lyceum of Catanduanes, Lyceum of Southern Philippines, Lyceum of Eastern Mindanao, Inc.,
and Western Pangasinan Lyceum, Inc., also educational institutions, to delete the word "Lyceum" from their corporate
names and to permanently enjoin them from using "Lyceum" as part of their respective names.

 The SEC hearing officer ruled in favor of LPI, relying upon the SEC’s ruling in the LBI case and holding that the word
"Lyceum" was capable of appropriation, LPI having acquired an enforceable exclusive right to the use of that word.

 On appeal, the SEC En Banc reversed and set aside the hearing officer’s decision, not considering the word "Lyceum" to
have become so identified with LPI as to render use thereof by other institutions as productive of confusion about the
identity of the schools concerned in the mind of the general public and holding that the attaching of geographical names
to the word "Lyceum" served sufficiently to distinguish the schools from one another.

 The Court of Appeals affirmed the SEC En Banc’s ruling.

 Hence, this case.

ISSUES:

(1) WON the word “Lyceum” can be appropriated by LPI to the exclusion of others. –NO

(2) WON the word “Lyceum” had acquired a secondary meaning in relation to LPI. –NO

RULING:

(1) The Articles of Incorporation of a corporation must set out the name of the corporation. Section 18 of the Corporation Code
establishes a restrictive rule insofar as corporate names are concerned:

"SECTION 18. Corporate name. — No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law or is patently deceptive, confusing or contrary
to existing laws. When a change in the corporate name is approved, The Commission shall issue an
amended certificate of incorporation under the amended name."
CorpoLaw.CaseDigests.WLC.nts2019 1
The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively
or confusingly similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary
to existing laws," is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned, the
evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporations. The
corporate names of LA, et. al. not are "identical with, or deceptively or confusingly similar" to that of LPI. The corporate names
of LA, et. al. all carry the word "Lyceum", but confusion and deception are effectively precluded by the appending of geographic
names to the word "Lyceum".

Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion, which refers to a locality on the river Ilissius in
ancient Athens "comprising an enclosure dedicated to Apollo and adorned with fountains and buildings erected by Pisistratus,
Pericles and Lycurgus frequented by the youth for exercise and by the philosopher Aristotle and his followers for teaching."

In time, the word "Lyceum" became associated with schools and other institutions providing public lectures and concerts and
public discussions. Today, the word "Lyceum" generally refers to a school or an institution of learning. "Lyceum" is in fact as
generic in character as the word "university." In the name of LPI, "Lyceum" appears to be a substitute for "university". In
other places, "Lyceum", or "Liceo", or "Lycee", denotes a secondary school or a college. It may be that the use of the word
"Lyceum" may not yet be as widespread as the use of "university," but it is clear that a not inconsiderable number of educational
institutions have adopted "Lyceum" or "Liceo" as part of their corporate names. Since "Lyceum" or "Liceo" denotes a school or
institution of learning, it is not unnatural to use this word to designate an entity which is organized and operating as an
educational institution.

(2) LPI claimed that the word "Lyceum" has acquired a secondary meaning in relation to it, hence, appropriable by it to the
exclusion of other institutions. The doctrine of secondary meaning originated in the field of trademark law. Its application has
been extended to corporate names, since the right to use a corporate name to the exclusion of others is based upon the same
principle which underlies the right to use a particular trademark or trade name.

In Philippine Nut Industry, Inc. v. Standard Brands, Inc., the doctrine of secondary meaning was elaborated thus:"a word or phrase
originally incapable of exclusive appropriation with reference to an article on the market because geographically or otherwise
descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in
that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product.

"No evidence was ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum' has
indeed acquired secondary meaning in favor of LPI. If there was any of this kind, the same tend to prove only that LPI had been
using the disputed word for a long period of time. Nevertheless, LPI’s exclusive use of the word “Lyceum” was never established
or proven, as in fact the WPLI was already using the word “Lyceum” seventeen (17) years prior to the date LPI started using the
same word in its corporate name.

Furthermore, educational institutions of the Roman Catholic Church had been using the same or similar word ('Liceo deManila,'
'Liceo de Baleno', 'Liceo de Masbate,' 'Liceo de Albay') long before LPI started using the word 'Lyceum'. LPI also failed to prove
that the word “Lyceum” has become so identified with its educational institution that confusion will surely arise in the minds
of the public if the same word were to be used by other educational institutions. While LPI may have proved that it had been using
the word “Lyceum” for a long period of time, this fact alone did not amount to mean that the said word had acquired secondary
meaning in its favor because LPI failed to prove that it had been using the same word all by itself to the exclusion of others. More
so, there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational
institutions.

THUS:

LPI is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and other
institutions may use "Lyceum" as part of their corporate names.

To determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with another entity's corporate
name, it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate corporate names in
their entirety and when the name of petitioner is juxtaposed with the names of LA, et.al., they are not reasonably regarded as
"identical" or "confusingly or deceptively similar" with each other.

CorpoLaw.CaseDigests.WLC.nts2019 2
LYCEUM OF THE PHILS. V. CA
219 SCRA 610

FACTS:
1. Petitioner had sometime commenced before in the SEC a complaint against Lyceum of Baguio, to require it to change its
corporate name and to adopt another name not similar or identical with that of petitioner. SEC decided in favor of petitioner.
Lyceum of Baguio filed petition for certiorari but was denied for
lack of merit.

2. Armed with the resolution of the Court, petitioner instituted before the SEC to compel private respondents, which are also
educational institutions, to delete word “Lyceum” from their corporate names and permanently to enjoin them from using such as
part of their respective names.

3. Hearing officer sustained the claim of petitioner and held that the word “Lyceum” was capable of appropriation and that
petitioner had acquired an enforceable right to the use of that word.

4. In an appeal, the decision was reversed by the SEC En Banc. They held that the word “Lyceum” to have become identified
with petitioner as to render use thereof of other institutions as productive of consfusion about the identity of the schools concerned
in the mind of the general public.

5. Petitioner went to appeal with the CA but the latter just affirmed the decision of the SEC En Banc.

HELD:
Under the corporation code, no corporate name may be allowed by the SEC if the proposed name is identical or deceptively or
confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive,
confusing or contrary to existing laws. The policy behind this provision is to avoid fraud upon the public, which would have the
occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of
administration and supervision over corporations.

The corporate names of private respondents are not identical or deceptively or confusingly similar to that of petitioner’s.
Confusion and deception has been precluded by the appending of geographic names to the word “Lyceum”. Furthermore, the
word “Lyceum” has become associated in time with schools and other institutions providing public lectures, concerts, and public
discussions. Thus, it generally refers to a school or an institution of learning.

Petitioner claims that the word has acquired a secondary meaning in relation to petitioner with the result that the word, although
originally generic, has become appropriable by petitioner to the exclusion of other institutions.

The doctrine of secondary meaning is a principle used in trademark law but has been extended to corporate names since the right
to use a corporate name to the exclusion of others is based upon the same principle, which underlies the right to use a particular
trademark or tradename. Under this doctrine, a word or phrase originally incapable of exclusive appropriation with reference to
an article in the market, because geographical or otherwise descriptive might nevertheless have been used for so long and so
exclusively by one producer with reference to this article that, in that trade and to that group of purchasing public, the word or
phrase has come to mean that the article was his produce. The doctrine cannot be made to apply where the evidence didn't prove
that the business has continued for so long a time that it has become of consequence and acquired good will of considerable value
such that its articles and produce have acquired a well known reputation, and confusion will result by the use of the disputed
name.

Petitioner didn't present evidence, which provided that the word “Lyceum” acquired secondary meaning. The petitioner failed to
adduce evidence that it had exclusive use of the word. Even if petitioner used the word for a long period of time, it hadn’t acquired
any secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the
exclusion of others.

CorpoLaw.CaseDigests.WLC.nts2019 3
G.R. No. 137592 December 12, 2001

ANG MGA KAANIB SA IGLESIA NG DIOS KAY KRISTO HESUS, H.S.K. SA BANSANG PILIPINAS, INC., petitioner,
vs.
IGLESIA NG DIOS KAY CRISTO JESUS, HALIGI AT SUHAY NG KATOTOHANAN, respondent.

Facts: Respondent Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan (Church of God in Christ Jesus, the Pillar
and Ground of Truth), is a non-stock religious society or corporation registered in 1936. Sometime in 1976, one Eliseo Soriano
and several other members of respondent corporation disassociated themselves from the latter and succeeded in registering in
1977 a new non-stock religious society or corporation, named Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng
Katotohanan.

Consequently, respondent corporation (Iglesia ng Dios Kay Cristo Jesus) filed with the SEC a petition to compel the Iglesia ng
Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan to change its corporate name, which petition was docketed as SEC
Case No. 1774.

The SEC rendered judgment in favor of respondent corporation (Iglesia ng Dios Kay Cristo Jesus), ordering the Iglesia ng Dios
Kay Kristo Hesus, Haligi at Saligan ng Katotohanan to change its corporate name to another name that is not similar or identical
to any name already used by a corporation, partnership or association registered with the Commission.

It appears that during the pendency of SEC Case No. 1774, Soriano, et al., caused the registration in 1980 of petitioner corporation,
Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K, sa Bansang Pilipinas. The acronym "H.S.K." stands for Haligi at
Saligan ng Katotohanan.

Subsequently, respondent corporation (Iglesia ng Dios Kay Cristo Jesus) filed before the SEC a petition praying that petitioner
corporation (Ang Mga Kaanib) be compelled to change its corporate name and be barred from using the same or similar name on
the ground that the same causes confusion among their members as well as the public.

The SEC rendered a decision ordering petitioner corporation (Ang Mga Kaanib) to change its corporate name.

Petitioner corporation (Ang Mga Kaanib) appealed to the SEC En Banc.

The SEC En Banc affirmed the above decision, upon a finding that petitioner corporation's (Ang Mga Kaanib) corporate name
was identical or confusingly or deceptively similar to that of respondent corporation's (Iglesia ng Dios Kay Cristo Jesus) corporate
name.

Petitioner corporation (Ang Mga Kaanib) filed a petition for review with the CA.

The CA affirmed the decision of the SEC En Banc.

Petitioner corporation (Ang Mga Kaanib) claims that it complied with the aforecited SEC guideline by adding not only two but
eight words to their registered name, to wit: "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.," which, petitioner corporation
(Ang Mga Kaanib) argues, effectively distinguished it from respondent corporation (Iglesia ng Dios Kay Cristo Jesus).

Issue: Whether or not petitioner corporation's (Ang Mga Kaanib) corporate name is identical or confusingly or deceptively similar
to that of respondent corporation's (Iglesia ng Dios Kay Cristo Jesus) corporate name.

Held: Yes. The SEC has the authority to de-register at all times and under all circumstances corporate names which in its
estimation are likely to spawn confusion. It is the duty of the SEC to prevent confusion in the use of corporate names not only for
the protection of the corporations involved but more so for the protection of the public.
CorpoLaw.CaseDigests.WLC.nts2019 4
Section 18 of the Corporation Code provides:
Corporate Name. — No corporate name may be allowed by the Securities and Exchange Commission if the
proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any
other name already protected by law or is patently deceptive, confusing or is contrary to existing laws. When a
change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation
under the amended name.

Corollary thereto, the pertinent portion of the SEC Guidelines on Corporate Names states:
(d) If the proposed name contains a word similar to a word already used as part of the firm name or style of a
registered company, the proposed name must contain two other words different from the name of the company
already registered;

Parties organizing a corporation must choose a name at their peril; and the use of a name similar to one adopted by another
corporation, whether a business or a nonprofit organization, if misleading or likely to injure in the exercise of its corporate
functions, regardless of intent, may be prevented by the corporation having a prior right, by a suit for injunction against the new
corporation to prevent the use of the name.

In the case at bar, the additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc." in petitioner corporation's
(Ang Mga Kaanib) name are, as correctly observed by the SEC, merely descriptive of and also referring to the members, or kaanib,
of respondent corporation (Iglesia ng Dios Kay Cristo Jesus) who are likewise residing in the Philippines. These words can hardly
serve as an effective differentiating medium necessary to avoid confusion or difficulty in distinguishing petitioner from
respondent. This is especially so, since both petitioner and respondent corporations are using the same acronym — H.S.K.; not to
mention the fact that both are espousing religious beliefs and operating in the same place. Parenthetically, it is well to mention
that the acronym H.S.K. used by petitioner corporation (Ang Mga Kaanib) stands for "Haligi at Saligan ng Katotohanan."

Significantly, the only difference between the corporate names of petitioner and respondent are the words SALIGAN and SUHAY.
These words are synonymous — both mean ground, foundation or support. Hence, this case is on all fours with Universal Mills
Corporation v. Universal Textile Mills, Inc., where the Court ruled that the corporate names Universal Mills Corporation and
Universal Textile Mills, Inc., are undisputably so similar that even under the test of "reasonable care and observation" confusion
may arise.

INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES vs. COURT OF APPEALS, SECURITIES

AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF THE PHILIPPINES

G.R. No. 122174, October 3, 2002

Facts: Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized on October 13, 1976. On
June 22, 1977, it registered its corporate and business name with the Bureau of Domestic Trade.

Petitioner IRCP was incorporated on August 23, 1979 originally under the name "Synclaire Manufacturing Corporation". It
amended its Articles of Incorporation on August 23, 1985 to change its corporate name to "Industrial Refractories Corp. of the
Philippines".

Both companies are the only local suppliers of monolithic gunning mix.

Respondent RCP then filed a petition with the Securities and Exchange Commission to compel petitioner IRCP to change its
corporate name.

The SEC rendered judgment in favor of respondent RCP.

Petitioner appealed to the SEC En Banc. The SEC En Banc modified the appealed decision and the petitioner was ordered to
delete or drop from its corporate name only the word "Refractories".

Petitioner IRCP filed a petition for review on certiorari to the Court of Appeals and the appellate court upheld the jurisdiction of
the SEC over the case and ruled that the corporate names of petitioner IRCP and respondent RCP are confusingly or deceptively
similar, and that respondent RCP has established its prior right to use the word "Refractories" as its corporate name.
CorpoLaw.CaseDigests.WLC.nts2019 5
Petitioner then filed a petition for review on certiorari

Issue: Are corporate names Refractories Corporation of the Philippines (RCP) and "Industrial Refractories Corp. of the
Philippines" confusingly and deceptively similar?

Ruling: Yes, the petitioner and respondent RCP’s corporate names are confusingly and deceptively similar.
Further, Section 18 of the Corporation Code expressly prohibits the use of a corporate name which is "identical or deceptively or
confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive,
confusing or contrary to existing laws". The policy behind said prohibition is to avoid fraud upon the public that will have occasion
to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of administration
and supervision over corporation.

The Supreme Court denied the petition for review on certiorari due for lack of merit.

#3 INDUSTRIAL REFRACTORIES VS CA – CASTILLO

TOPIC: CORPORATE NAME

DOCTRINE: The SEC has absolute jurisdiction over all corporations so it can implement the Corporation Code. Section 18 of
the Corporation Code prohibits any proposed name which is identical or deceptively or confusingly similar to that of any existing
corporation or any other name already protected by law.

FACTS:
1. Refractories Corporation of the Philippines (RCP), herein respondent was organized in 1976 and was incorporated in 1977.
RCP is engaged in manufacturing, selling, exporting and dealing in any and all refractory bricks, its by-products and derivatives.
2. Industrial Refractories Corporation of the Philippines (IRCP), herein petitioner was incorporated in 1979 under the name of
Synclaire Manufacturing Corporation. It amended its Articles of Incorporation in 1985 and changed its name into IRCP. It is
engaged in manufacturing all kinds of ceramic products except paint and zincs.
3. In 1988, RCP found out that IRCP was using such corporate name so it filed a petition before the SEC to compel the latter to
change its corporate name because it is confusingly similar with former’s corporate name. SEC ruled in favour of RCP and ordered
IRCP to remove RCP in its corporate name.
4. SEC En Banc modified and ordered to remove the word “Refractories” only. CA affirmed SEC En Banc Decision.

ISSUES:
1. WON SEC has jurisdiction over the case? YES.
2. WON RCP is entitled to the exclusive use of the word “Refractories” even though it is a generic word? YES.
3. WON the 2 corporate names are confusingly similar? YES.

RATIO:
First Issue:
1. SEC’s jurisdiction is not merely confined within sec. 5 PD 902-A, but by express mandate, has absolute jurisdiction, supervision
and control over all corporations. Hence, it can enforce the Corporation Code. Section 18 (See Doctrine).
2. SEC has duty to prevent confusion to protect corporations and the public so it has the authority to determine whether the
corporate names would likely to cause confusion, thus, has jurisdiction.
Second Issue:
1. “Refractories” refers to structural materials used at high temperature to industrial furnaces. It is a generic term, but its usage is
not widespread and is limited merely to the industry or trade in which it is used. Hence, continuous use by RCP for considerable
period has made the term so closely identified with it.
Third issue:
1. In Philips Export BV vs CA, the Court held that to fall within the prohibition, 2 requisites must be proven:
(1) that the complainant corporation acquired a prior right over the use of such corporate name;
(2) the proposed name is either: (a) identical, or (b) deceptively or confusingly similar to that of any existing corporation
or to any other name already protected by law; or (c) patently deceptive, confusing or contrary to existing law.
2. First requisite is determined by Priority of Adoption. RCP used it in 1976, while IRCP in 1985 only or 9 years after former.
Hence, RCP acquired prior right to use of “Refractories” in its corporate name.
3. Second requisite is determined by if it would mislead a person using ordinary care and discrimination. Both corporations have
the words “Refractories”, “Corporation”, and “Philippines” and the only distinguishing word is “Industrial”. “Industrial” merely
identifies a corporation’s general field of activities or operations.
CorpoLaw.CaseDigests.WLC.nts2019 6
4. Therefore, names are patently similar that even with reasonable care and observation, confusion might arise. It happened as
found by SEC that there were instances when different steel companies were confused especially both have same packaging.
5. Revised Guidelines in the Approval of Corporate And Partnership Names requires:
(1) a corporate name shall not be identical, misleading or confusingly similar to one already registered by another
corporation with the Commission; and
(2) if the proposed name is similar to the name of a registered firm, the proposed name must contain at least one distinctive
word different from the name of the company already registered.

DISPOSITIVE: Court denied the petition. RCP (respondent) won.

JG Summit Holdings vs CA Case Digest

JG Summit Holdings Inc. vs. Court of Appeals
[GR 124293, 20 November 2000]

Facts: On 27 January 1977, the National Investment and Development Corporation (NIDC), a government corporation, entered
into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (Kawasaki) for the construction,
operation, and management of the Subic National Shipyard, Inc. (SNS), which subsequently became the Philippine Shipyard and
Engineering Corporation (PHILSECO). Under the JVA, NIDC and Kawasaki would maintain a shareholding proportion of 60%
- 40%, respectively. One of the provisions of the JVA accorded the parties the right of first refusal should either party sell, assign
or transfer its interest in the joint venture. On 25 November 1986, NIDC transferred all its rights, title and interest in PHILSECO
to the Philippine National Bank (PNB).

More than two months later or on 3 February 1987, by virtue of Administrative Order 14, PNB's interest in PHILSECO was
transferred to the National Government. Meanwhile, on 8 December 1986, President Corazon C. Aquino issued Proclamation 50
establishing the Committee on Privatization (COP) and the Asset Privatization Trust (APT) to take title to and possession of,
conserve, manage and dispose of non-performing assets of the National Government. On 27 February 1987, a trust agreement
was entered into between the National Government and the APT by virtue of which the latter was named the trustee of the National
Government's share in PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO to settle its huge obligations to
PNB, the National Government's shareholdings in PHILSECO increased to 97.41% thereby reducing Kawasaki's shareholdings
to 2.59%. Exercising their discretion, the COP and the APT deemed it in the best interest of the national economy and the
government to privatize PHILSECO by selling 87.67% of its total outstanding capital stock to private entities.

After a series of negotiations between the APT and Kasawaki, they agreed that the latter's right of first refusal under the JVA be
"exchanged" for the right to top by 5% the highest bid for said shares. They further agreed that Kawasaki would be entitled to
name a company in which it was a stockholder, which could exercise the right to top. On 7 September 1990, Kawasaki informed
APT that Philyards Holdings, Inc. (PHI) would exercise its right to top by 5%. At the pre-bidding conference held on 28 September
1993, interested bidders were given copies of the JVA between NIDC and Kawasaki, and of the Asset Specific Bidding Rules
(ASBR) drafted for the 87.67% equity (sic) in PHILSECO of the National Government. The provisions of the ASBR were
explained to the interested bidders who were notified that bidding would be held on 2 December 1993. At the public bidding on
said date, the consortium composed of JG Summit Holdings, Inc. (JGSMI), Sembawang Shipyard Ltd. of Singapore
(Sembawang), and Jurong Shipyard Limited of Malaysia (Jurong), was declared the highest bidder at P2.03 billion. The following
day, the COP approved the sale of 87.67% National Government shares of stock in PHILSECO to said consortium. It notified
JGSMI of said approval "subject to the right of Kawasaki Heavy Industries, Inc./Philyards Holdings, Inc. to top JGSMI's bid by
5% as specified in the bidding rules."

On 29 December 1993, JGSMI informed the APT that it was protesting the offer of PHI to top its bid on the grounds that: (a) the
Kawasaki/PHI consortium composed of Kawasaki, Philyards, Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the
ASBR because the last four (4) companies were the losing bidders (for P1.528 billion) thereby circumventing the law and
prejudicing the weak winning bidder; (b) only Kawasaki could exercise the right to top; (c) giving the same option to top to PHI
constituted unwarranted benefit to a third party; (d) no right of first refusal can be exercised in a public bidding or auction sale,
and (e) the JG Summit Consortium was not estopped from questioning the proceedings. On 2 February 1994, JGSMI was notified
that PHI had fully paid the balance of the purchase price of the subject bidding. On 7 February 1994, the APT notified JGSMI
that PHI had exercised its option to top the highest bid and that the COP had approved the same on 6 January 1994. On 24
February 1994, the APT and PHI executed a Stock Purchase Agreement. Consequently, JGSMI filed with the Supreme Court a
CorpoLaw.CaseDigests.WLC.nts2019 7
petition for mandamus under GR 114057. On 11 May 1994, said petition was referred to the Court of Appeals. On 18 July 1995,
the Court of Appeals "denied" for lack of merit the petition for mandamus. JGSMI filed a motion for the reconsideration of said
Decision which was denied on 15 March 1996. JGSMI filed the petition for review on certiorari.

Issue: Whether PHILSECO, as a shipyard, is a public utility and, hence, could be operated only by a corporation at least 60% of
whose capital is owned by Filipino citizens, in accordance with Article XII, Section 10 of the Constitution.

Held: A shipyard such as PHILSECO being a public utility as provided by law, Section 11 of the Article XII of the Constitution
applies. The provision states that "No franchise, certificate, or any other form of authorization for the operation of a public utility
shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines
at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be
exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the
condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The
State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and
managing officers of such corporation or association shall be citizens of the Philippines." The progenitor of this constitutional
provision, Article XIV, Section 5 of the 1973 Constitution, required the same proportion of 60% - 40% capitalization. The JVA
between NIDC and Kawasaki entered into on 27 January 1977 manifests the intention of the parties to abide by the constitutional
mandate on capitalization of public utilities. The joint venture created between NIDC and Kawasaki falls within the purview of
an "association" pursuant to Section 5 of Article XIV of the 1973 Constitution and Section 11 of Article XII of the 1987
Constitution. Consequently, a joint venture that would engage in the business of operating a public utility, such as a shipyard,
must observe the proportion of 60%-40% Filipino-foreign capitalization. Further, paragraph 1.4 of the JVA accorded the parties
the right of first refusal "under the same terms." This phrase implies that when either party exercises the right of first refusal under
paragraph 1.4, they can only do so to the extent allowed them by paragraphs 1.2 and 1.3 of the JVA or under the proportion of
60%-40% of the shares of stock. Thus, should the NIDC opt to sell its shares of stock to a third party, Kawasaki could only
exercise its right of first refusal to the extent that its total shares of stock would not exceed 40% of the entire shares of stock of
SNS or PHILSECO. The NIDC, on the other hand, may purchase even beyond 60% of the total shares. As a government
corporation and necessarily a 100% Filipino-owned corporation, there is nothing to prevent its purchase of stocks even beyond
60% of the capitalization as the Constitution clearly limits only foreign capitalization. Kawasaki was bound by its contractual
obligation under the JVA that limits its right of first refusal to 40% of the total capitalization of PHILSECO. Thus, Kawasaki
cannot purchase beyond 40% of the capitalization of the joint venture on account of both constitutional and contractual
proscriptions. From the facts on record, it appears that at the outset, the APT and Kawasaki respected the 60%-40% capitalization
proportion in PHILSECO. However, APT subsequently encouraged Kawasaki to participate in the public bidding of the National
Government's shareholdings of 87.67% of the total PHILSECO shares, definitely over and above the 40% limit of its
shareholdings. In so doing, the APT went beyond the ambit of its authority.

JG Summit Holdings INC. vs. Court of Appeals

G.R. No. 124293 January 31, 2005

Facts: The National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint Venture
Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard Inc., (SNS) which subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO).

Under the JVA, the NDC and KAWASAKI will contribute P330M for the capitalization of PHILSECO in the proportion of 60%-
40% respectively. One of its salient features is the grant to the parties of the right of first refusal should either of them decide to
sell, assign or transfer its interest in the joint venture.

NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB). Such interests were
subsequently transferred to the National Government pursuant to an Administrative Order.

When the former President Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset
Privatization Trust (APT) to take title to, and possession of, conserve, manage and dispose of non-performing assets of the
National Government, a trust agreement was entered into between the National Government and the APT wherein the latter was
named the trustee of the National Government’s share in PHILSECO.

In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Government’s
share in PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI , they agreed that the
CorpoLaw.CaseDigests.WLC.nts2019 8
latter’s right of first refusal under the JVA be “exchanged” for the right to top by 5%, the highest bid for the said shares. They
further agreed that KAWASAKI woul.d be entitled to name a company in which it was a stockholder, which could exercise the
right to top. KAWASAKI then informed APT that Philyards Holdings, Inc. (PHI) would exercise its right to top.

At the public bidding, petitioner J.G. Summit Holdings Inc. submitted a bid of Two Billion and Thirty Million Pesos
(Php2,030,000,000.00) with an acknowledgement of KAWASAKI/PHILYARDS right to top.

As petitioner was declared the highest bidder, the COP approved the sale “subject to the right of Kawasaki Heavy Industries, Inc.
/ PHILYARDS Holdings Inc. to top JG’s bid by 5% as specified in the bidding rules.”

On the other hand, the respondent by virtue of right to top by 5%, the highest bid for the said shares timely exercised the same.

Petitioners, in their motion for reconsideration, raised, inter alia, the issue on the maintenance of the 60%-40% relationship
between the NIDC and KAWASAKI arising from the Constitution because PHILSECO is a landholding corporation and need
not be a public utility to be bound by the 60%-40% constitutional limitation.

ISSUE: Whether or not the respondent is prohibited to possess the disputed property considering the prohibition stipulated in the
1987 Constitution against foreign owned companies.
RULING: The court upheld the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC.
The right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA.
This right allows them to purchase the shares of their co-shareholder before they are offered to a third party. The agreement of
co-shareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions of the
Constitution limiting land ownership to Filipinos and Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO
still owns the land, the right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40%
ration. This transfer by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent intent.
The transfer could be made either to a nominee or such other party which the holder of the right of first refusal feels it can
comfortably do business with.
Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can
exceed 40% of PHILSECO’s equity. In fact, in can even be said that if the foreign shareholdings of a landholding corporation
exeeds 40%, it is not the foreign stockholders’ ownership of the shares which is adversely affected but the capacity of the
corporation to won land—that is, the corporation becomes disqualified to own land.
This finds support under the basic corporate law principle that the corporation and its stockholders are separate judicial entities.
In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the
corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law
disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign
equity, what the law disqualifies is the corporation from owning land.
Young Auto Supply vs CA Case Digest
Young Auto Supply vs. Court of Appeals
[GR 104175, 25 June 1993]

Facts: On 28 October 1987, Young Auto Supply Co. Inc. (YASCO) represented by Nemesio Garcia, its president, Nelson Garcia
and Vicente Sy, sold all of their shares of stock in Consolidated Marketing & Development Corporation (CMDC) to George C.
Roxas. The purchase price was P8,000,000.00 payable as follows: a down payment of P4,000,000.00 and the balance of
P4,000,000.00 in four postdated checks of P1,000,000.00 each. Immediately after the execution of the agreement, Roxas took full
control of the four markets of CMDC. However, the vendors held on to the stock certificates of CMDC as security pending full
payment of the balance of the purchase price. The first check of P4,000,000.00, representing the down payment, was honored by
the drawee bank but the four other checks representing the balance of P4,000,000.00 were dishonored. In the meantime, Roxas
sold one of the markets to a third party. Out of the proceeds of the sale, YASCO received P600,000.00, leaving a balance of
P3,400,000.00.

Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the sale of the CMDC shares to
Nemesio Garcia. On 10 June 1988, YASCO and Garcia filed a complaint against Roxas in the Regional Trial Court, Branch 11,
Cebu City, praying that Roxas be ordered to pay them the sum of P3,400,000.00 or that full control of the three markets be turned
over to YASCO and Garcia. The complaint also prayed for the forfeiture of the partial payment of P4,600,000.00 and the payment
of attorney's fees and costs. Failing to submit his answer, and on 19 August 1988, the trial court declared Roxas in default. The
order of default was, however, lifted upon motion of Roxas. On 22 August 1988, Roxas filed a motion to dismiss. After a hearing,
wherein testimonial and documentary evidence were presented by both parties, the trial court in an Order dated 8 February 1991
denied Roxas' motion to dismiss. After receiving said order, Roxas filed another motion for extension of time to submit his answer.
CorpoLaw.CaseDigests.WLC.nts2019 9
He also filed a motion for reconsideration, which the trial court denied in its Order dated 10 April 1991 for being pro-forma.
Roxas was again declared in default, on the ground that his motion for reconsideration did not toll the running of the period to
file his answer. On 3 May 1991, Roxas filed an unverified Motion to Lift the Order of Default which was not accompanied with
the required affidavit of merit. But without waiting for the resolution of the motion, he filed a petition for certiorari with the Court
of Appeals. The Court of Appeals dismissal of the complaint on the ground of improper venue. A subsequent motion for
reconsideration by YASCO was to no avail. YASCO and Garcia filed the petition.

Issue: Whether the venue for the case against YASCO and Garcia in Cebu City was improperly laid.

Held: A corporation has no residence in the same sense in which this term is applied to a natural person. But for practical purposes,
a corporation is in a metaphysical sense a resident of the place where its principal office is located as stated in the articles of
incorporation. The Corporation Code precisely requires each corporation to specify in its articles of incorporation the "place where
the principal office of the corporation is to be located which must be within the Philippines." The purpose of this requirement is
to fix the residence of a corporation in a definite place, instead of allowing it to be ambulatory. Actions cannot be filed against a
corporation in any place where the corporation maintains its branch offices. The Court ruled that to allow an action to be instituted
in any place where the corporation has branch offices, would create confusion and work untold inconvenience to said entity. By
the same token, a corporation cannot be allowed to file personal actions in a place other than its principal place of business unless
such a place is also the residence of a co-plaintiff or a defendant. With the finding that the residence of YASCO for purposes of
venue is in Cebu City, where its principal place of business is located, it becomes unnecessary to decide whether Garcia is also a
resident of Cebu City and whether Roxas was in estoppel from questioning the choice of Cebu City as the venue. The decision of
the Court of Appeals was set aside.

CASE DIGEST: CORPORATION LAW

Case Title: CECILIA CASTILLO et al. and MEDICAL CENTER PARANAQUE, INC., petitioner, v. ANGELES
BALINGHASAY et al. Docket Number: G.R. 150976 (2004) Ponente: J. Quisumbing

FACTS: (Illustration) MEDICAL CENTER PARANAQUE CITY Domestic corporation, incorporated in 1977 when the old
Corporation Law (Act 1459) was still in effect. Year 1977 Articles VII of Articles of Incorporation states that only CLASS A
shares has the right to vote and the right to be elected as directors or corporate officers. CLASS A shareholders CLASS B
shareholders Year 1992 Articles VII of Articles of Incorporation was amended, and states that unless otherwise provided by law,
only holders of CLASS A shares have the right to vote and the right to be elected as directors or corporate officers. Class B
contends that because of the New Corporation Code or BP 68 which was effective, they are now entitled to vote and be elected
as corporate officers, considering that Class B shares are also common shares, similar to that of Class A. Issue: Is Article VII of
the Articles of Incorporation void being contrary to the New Corporation Law? Are Class B shareholders entitled to vote and be
corporate officers under the new law? Court Ruling: YES. Under the old law: (Art. 1459) Section 5 grants classification of shares
from capital stock and non-capital stock. Capital stockholders are called stockholders or shareholders while non-capital stock
owners are called members. Under the new law: (BP 68) No share of may be deprived of voting rights except those classified and
issued as “preferred” or “redeemable” shares. In this case, Class B shares was not found to be preferred or redeemable shares,
hence, they are considered as common shares similar to that of Class A and is thus entitled to vote and be corporate officers.
CASE DIGEST: CORPORATION LAW Petitioners and respondents are stockholders of Medical Center Paranaque, Inc., with
the petitioners holding Class B shares and the respondents holding Class A shares. Medical Center Paranaque is a domestic
corporation in Paranaque City, and was organized sometime in 1977 when the old Corporation Law (Act 1459) was still in force
and effect. Article VII of the MCPI’s original Articles of Incorporation, as approved by the Securities and Exchange Commission
provides that the authorized capital stock of the corporation amounts to P2 million pesos, and that only holders of Class A shares
may have the right to vote and the right to be elected as directors or as corporate officers”. Further, in 1991, the same provision
was amended, which increased the authorized capital stock to P32 million adding further that “unless authorized by law, only
shareholders of Class A has the right to vote and be elected as corporate officers.” Class B petitioners alleged that they were
deprived of their right to vote and be voted as directors at the annual stockholders’ meeting since respondents Class A shareholders
have erroneously relied on the Articles of Incorporation of MCPI, despite that Article VII, which holds Class A shares who only
has the right to vote and be corporate officers, is contrary to the new Corporation Law or BP 68. Hence, this petition.

ISSUE: Is Article VII of the Articles of Incorporation (which denies Class B shares voting rights) contrary to Section 6 of the
New Corporation Code or BP 68? Are Class B shareholders entitled to vote?

COURT RULING: Article VII of the Articles of Incorporation is VOID for being contrary to Section 6 of the New Corporation
Code or BP 68. Let us take note of the fact that there are two laws being cited and relied upon by the parties in this case—Act
1459 or the Old Corporation Code, which was in force and effect at the time of MCPI’s incorporation, and BP 68 or the New
Corporation Code, when Article VII of their Articles of Incorporation was amended. Since the amendment happened in 1992, the
CorpoLaw.CaseDigests.WLC.nts2019 10
law in force was already the BP 68 and not Act 1459 which was repealed by then. At the time of incorporation of Act 1459, the
right to classify its shares of stock was sanctioned by Section 5 of Act 1459. The law repealing the said law, or currently the BP
68, retained the same grant of right or classification of stock shares to corporation, but with a significant change. Under Section
6 of BP 68, the requirements and restrictions on voting rights were explicitly provided for, such that “no share may be deprived
of voting rights except those classified and issued as “preferred” or “redeemable” shares, unless otherwise provided in this Code.
Section 6 of the Corporation Code, being deemed written into Article VII of the Article of Incorporation, necessarily follows that
unless Class B shares of MCPI stocks are clearly categorized to be preferred or redeemable shares, the holders of said Class B
shares may not be deprived of their voting rights. Note that there is nothing in the Articles of Incorporation, nor an iota of evidence
on record to show that Class B shares were categorized as preferred or redeemable shares. Hence, Class B shares fall under the
common shares category and thus, under the law, are allowed to exercise voting rights.

CASTILLO vs. BALINGHASAY

G.R. No. 150976 October 18, 2004

FACTS: Petitioners and the respondents are stockholders of MCPI, with the former holding Class "B" shares and the latter owning
Class "A" shares. MCPI is a domestic corporation. It was organized sometime in September 1977. At the time of its incorporation,
Act No. 1459, the old Corporation Law was still in force and effect. On September 9, 1992, Article VII was again amended. It
states that “Except when otherwise provided by law, only holders of Class "A" shares have the right to vote and the right to be
elected as directors or as corporate officers.” The SEC approved the foregoing amendment on September 22, 1993. On February
9, 2001, the shareholders of MCPI held their annual stockholders’ meeting and election for directors. During the course of the
proceedings, respondent Rustico Jimenez, citing Article VII, as amended, and notwithstanding MCPI’s history, declared over the
objections of herein petitioners, that no Class "B" shareholder was qualified to run or be voted upon as a director. In the past,
MCPI had seen holders of Class "B" shares voted for and serve as members of the corporate board and some Class "B" share
owners were in fact nominated for election as board members. Nonetheless, Jimenez went on to announce that the candidates
holding Class "A" shares were the winners of all seats in the corporate board. The petitioners protested, claiming that Article VII
was null and void for depriving them, as Class "B" shareholders, of their right to vote and to be voted upon, in violation of the
Corporation Code (Batas Pambansa Blg. 68), as amended. On March 22, 2001, after their protest was given short shrift, herein
petitioners filed a Complaint for Injunction, Accounting and Damages before the RTC of Parañaque City, Branch 258. In finding
for the respondents, the trial court ruled that corporations had the power to classify their shares of stocks, such as "voting and
non-voting" shares, conformably with Section 67 of the Corporation Code of the Philippines. It pointed out that Article VII of
both the original and amended Articles of Incorporation clearly provided that only Class "A" shareholders could vote and be voted
for to the exclusion of Class "B" shareholders, the exception being in instances provided by law, such as those enumerated in
Section 6, paragraph 6 of the Corporation Code. The RTC found merit in the respondents’ theory that the Articles of Incorporation,
which defines the rights and limitations of all its shareholders, is a contract between MCPI and its shareholders. It is thus the law
between the parties and should be strictly enforced as to them. Hence this petition.

ISSUE: Whether or not holders of Class "B" shares of the MCPI may be deprived of the right to vote and be voted for as directors
in MCPI.

RULING: The law referred to in the amendment to Article VII refers to the Corporation Code and no other law. At the time of
the incorporation of MCPI in 1977, the right of a corporation to classify its shares of stock was sanctioned by Section 5 of Act
No. 1459. The law repealing Act No. 1459, B.P. Blg. 68, retained the same grant of right of classification of stock shares to
corporations, but with a significant change. Under Section 6 of B.P. Blg. 68, the requirements and restrictions on voting rights
were explicitly provided for, such that "no share may be deprived of voting rights except those classified and issued as "preferred"
or "redeemable" shares, unless otherwise provided in this Code" and that "there shall always be a class or series of shares which
have complete voting rights." Section 6 of the Corporation Code being deemed written into Article VII of the Articles of
Incorporation of MCPI, it necessarily follows that unless Class "B" shares of MCPI stocks are clearly categorized to be "preferred"
or "redeemable" shares, the holders of said Class "B" shares may not be deprived of their voting rights. Note that there is nothing
in the Articles of Incorporation nor an iota of evidence on record to show that Class "B" shares were categorized as either
"preferred" or "redeemable" shares. The only possible conclusion is that Class "B" shares fall under neither category and thus,
under the law, are allowed to exercise voting rights.

There is no merit in respondents’ position that Section 6 of the Corporation Code cannot apply to MCPI without running afoul of
the non-impairment clause of the Bill of Rights. Section 148 of the Corporation Code expressly provides that it shall apply to
corporations in existence at the time of the effectivity of the Code. 

CorpoLaw.CaseDigests.WLC.nts2019 11
CASTILLO V. BALINGHASAY (G.R. No. 150976 October 18, 2004)

FACTS:  Petitioners and the respondents are stockholders of MCPI (Medical Center Parañaque,Inc.) with the former holding
Class “B” shares and the latter owning Class “A” shares. MCPI is a domestic corporation organized sometime in September 1977.
At the time of its incorporation, Act No. 1459, the old Corporation Law was still in force and effect. Article VII of MCPI’s original
Articles of Incorporation, as approved by the Securities and Exchange Commission (SEC) on October 26, 1977, contained a
provision that read as follows: Only holders of Class A shares can have the right to vote and the right to be elected as directors or
as corporate officers.

 On September 9, 1992, Article VII was again amended to provide as follows: Except when otherwise provided by law, only
holders of Class “A” shares have the right to vote and the right to be elected as directors or as corporate officers.

 On February 9, 2001, the shareholders of MCPI held their annual stockholders’ meeting and election for directors. During the
course of the proceedings, respondent Rustico Jimenez, citing Article VII, as amended, and notwithstanding MCPI’s history,
declared over the objections of herein petitioners, that no Class “B” shareholder was qualified to run or be voted upon as a director.

 In the past, MCPI had seen holders of Class “B” shares voted for and serve as members of the corporate board and some Class
“B” share owners were in fact nominated for election as board members. Nonetheless, Jimenez went on to announce that the
candidates holding Class “A” shares were the winners of all seats in the corporate board. The petitioners protested, claiming that
Article VII was null and void for depriving them, as Class “B” shareholders, of their right to vote and to be voted upon, in violation
of the Corporation Code (Batas Pambansa Blg. 68), as amended.

 On March 22, 2001, after their protest was given short shrift, herein petitioners filed a Complaint for Injunction, Accounting
and Damages, docketed as Civil Case No. CV-01-0140 before the RTC of Parañaque City, Branch 258.

 In their Answer, the respondents claimed that the exclusivity of the right granted to Class “A” holders cannot be defeated or
impaired by any subsequent legislative enactment, e.g. the New Corporation Code, as the Articles of Incorporation is an intra-
corporate contract between the corporation and its members; between the corporation and its stockholders; and among the
stockholders. They submit that to allow Class “B” shareholders to vote and be elected as directors would constitute a violation of
MCPI’s franchise or charter as granted by the State.

ISSUE: Whether or not holders of Class “B” shares of the MCPI may be deprived of the right to vote and be voted for as directors
in MCPI.

HELD: When Article VII of the Articles of Incorporation of MCPI was amended in 1992, the phrase “except when otherwise
provided by law” was inserted in the provision governing the grant of voting powers to Class “A” shareholders. This particular
amendment is relevant for it speaks of a law providing for exceptions to the exclusive grant of voting rights to Class “A”
stockholders. Which law was the amendment referring to? The determination of which law to apply is necessary. There are two
laws being cited and relied upon by the parties in this case. In this instance, the law in force at the time of the 1992 amendment
was the Corporation Code (B.P. Blg. 68), not the Corporation Law (Act No. 1459), which had been repealed by then.

We find and so hold that the law referred to in the amendment to Article VII refers to the Corporation Code and no other
law. At the time of the incorporation of MCPI in 1977, the right of a corporation to classify its shares of stock was sanctioned by
Section 5 of Act No. 1459. The law repealing Act No. 1459, B.P. Blg. 68, retained the same grant of right of classification of
stock shares to corporations, but with a significant change. Under Section 6 of B.P. Blg. 68, the requirements and restrictions on
voting rights were explicitly provided for, such that “no share may be deprived of voting rights except those classified and issued
as “preferred” or “redeemable” shares, unless otherwise provided in this Code” and that “there shall always be a class or series of
shares which have complete voting rights.”

Section 6 of the Corporation Code being deemed written into Article VII of the Articles of Incorporation of MCPI, it
necessarily follows that unless Class “B” shares of MCPI stocks are clearly categorized to be “preferred” or “redeemable” shares,
the holders of said Class “B” shares may not be deprived of their voting rights. Note that there is nothing in the Articles of
Incorporation nor an iota of evidence on record to show that Class “B” shares were categorized as either “preferred” or
“redeemable” shares. The only possible conclusion is that Class “B” shares fall under neither category and thus, under the law,
are allowed to exercise voting rights.

CorpoLaw.CaseDigests.WLC.nts2019 12